Mutual funds are more than just an investment product they’re a way for everyday individuals to access professionally managed portfolios without needing deep market knowledge or large sums of money. Whether it’s stocks, bonds, or even gold, mutual funds allow you to invest in a range of assets through a single channel. And the best part? You can start with as little as Rs. 100.
This article breaks down the core functions and roles of mutual funds, helping you understand how they work, who manages them, and how you benefit as an investor. If you’re new to investing or looking to diversify your current portfolio, this guide is a solid place to start. If you're someone looking for long-term growth with minimal involvement, mutual funds can offer both diversification and expert management at a low entry point. Begin your mutual fund journey with just Rs. 100
Overview of mutual funds
A mutual fund collects money from many investors and then invests that pool of money into different kinds of assets—like shares, bonds, or even commodities like gold. These funds are managed by Asset Management Companies (AMCs), who employ expert fund managers to make strategic decisions on your behalf.
Fund managers don’t just pick investments randomly—they conduct deep research, look at market trends, and analyse the economy to ensure your money is invested wisely. You also pay a small fee called an #expense ratio, which goes towards managing the fund. This fee varies by fund type.
In short, mutual funds offer a low-effort way to grow your money, spread your risks, and participate in the financial markets—all without needing to track every market move yourself. With thousands of mutual fund schemes available, understanding and comparing them based on your goals, risk appetite, and returns can help you make informed choices. Compare equity, debt, and hybrid funds in one place
What are the functions of mutual funds?
Mutual funds play multiple roles for investors, especially when it comes to reducing risk and making investing more accessible. Here's a closer look at their key functions:
1. Pooling of funds
When a mutual fund scheme launches, it invites investors to contribute money. This collective capital is then invested across different securities—like equities, bonds, or even sector-based assets. The idea is simple: small amounts from many investors can be pooled to create a larger, more powerful investment.
You don’t need lakhs to get started; #mutual funds let you buy units based on how much you want to invest. But before jumping in, it's always wise to check the fund's goals and track record.
2. Professional management
Not everyone has the time or expertise to analyse financial statements or track stock market trends. That’s where professional fund managers come in. These experts handle all the research, investment decisions, and risk management on your behalf. Their main goal? To help the fund meet its investment objectives while navigating market ups and downs.
3. Liquidity
One of the biggest benefits of mutual funds is how easy it is to enter and exit. You can buy or sell your units on any business day at the current #Net Asset Value (NAV). This means your investments are not locked away and can be accessed when needed—making mutual funds ideal for both long-term goals and short-term needs.
4. Returns
Returns in mutual funds come in two major forms. Some funds pay dividends to investors from the profits they earn—these are known as dividend mutual funds. Others, called growth mutual funds, reinvest the earnings back into the scheme, which can increase the value of your units over time. In both cases, your returns are linked to the market performance of the fund's underlying assets. Whether you seek periodic income or long-term capital appreciation, mutual funds offer return options that suit different investment styles. See how different mutual funds have performed historically
Scope of mutual funds
Mutual funds in India have come a long way—from a limited selection of schemes to an expansive universe with something for every kind of investor. Whether you're a first-time investor with a small budget or someone looking to diversify globally, mutual funds offer a wide menu of options.
Thanks to the rise of new #Asset Management Companies (AMCs) and innovative investment products, investors today can explore funds tailored to specific sectors, regions, or risk appetites. You can go for large-cap funds if you prefer stability, or small-cap and thematic funds if you're comfortable with more market movement. Mutual funds also make sense if you’re short on time to analyse markets or manage a direct stock portfolio—since professional fund managers take care of that for you.
The best part? You can start small, stay diversified, and gradually build a robust investment strategy aligned with your goals. Whether your aim is wealth creation, tax saving, or passive income, mutual funds give you the flexibility to choose. With such a broad universe of schemes—from global funds to sector-specific themes—it’s important to align your fund selection with your financial outlook and life goals. Explore top-performing mutual funds
How to purchase mutual funds?
Investing in mutual funds is no longer a tedious process—it’s fast, paperless, and tailored to your preferences. Here’s a simple, step-by-step guide to help you get started:
1. Define your investment goals
Begin by identifying your goal. Are you investing for short-term stability, long-term growth, or tax savings? For instance:
Long-term growth? Try index or equity funds.
Safety with liquidity? Consider #debt mutual funds.
Tax savings? ELSS mutual funds can help under Section 80C.
2. Choose between direct and regular plans
Direct mutual funds allow you to invest directly with the AMC and usually have lower expense ratios.
Regular mutual funds are purchased through distributors or advisors and might involve a slightly higher fee due to commission.
3. Research and shortlist funds
Compare funds based on historical performance, fund manager expertise, expense ratios, and investment objectives. Online platforms make this easier with filters and comparisons.
4. Open an investment account
If you don’t already have one, you can easily create an account on platforms like the Bajaj Finserv Mutual Fund Platform, which allows you to complete your KYC, choose schemes, and begin investing digitally.
5. Make your investment
Log in, pick your fund, and choose between lump sum or #SIP investment. Set up automated debits for SIPs if needed.
6. Track and manage your portfolio
After investing, monitor fund performance regularly. Review your goals annually and rebalance your portfolio if required. Also, keep an eye on NAV, market trends, and fund house updates
Explore other mutual fund categories to invest in 2025 |
|||
Functions of mutual funds – A quick summary
Mutual funds simplify investing by allowing you to participate in markets without needing to study each stock or bond individually. Instead of handpicking assets, you invest in a ready-made basket of securities, managed by professionals who understand how to navigate market ups and downs.
When you invest in a mutual fund, you’re essentially pooling your money with others to collectively invest in a diverse portfolio. This not only reduces the risk of putting all your eggs in one basket but also opens the door to expert management and relatively steady returns over time.
Different mutual fund types cater to different investment needs—be it growth, income, stability, or even sector-specific exposure. So whether your goal is to beat inflation, save taxes, or build long-term wealth, there’s likely a mutual fund structure that fits your purpose.
With options spanning various categories like equity, debt, and hybrid funds, investors can find suitable choices among the 2000+ mutual funds listed on the Bajaj Finserv Platform and compare mutual funds. Fund managers play a pivotal role in navigating these options, aiming to optimise returns while managing risks. Moreover, regulatory bodies like AMFI ensure transparency and ethical practices within the mutual fund industry, fostering investor confidence. As investors weigh their options, thorough research into scheme-related documents and market trends becomes paramount, empowering informed investment decisions. Through the Bajaj Finserv Platform, investors gain access to a robust ecosystem that facilitates seamless investing and ongoing support, positioning them for long-term financial success.
Essential tools for mutual fund investors
|
|
